RitaTrichur

In doing so, the smallest of Canada's five biggest banks capped off a strong earnings season for the country's big lenders. While CIBC's second-quarter profit fell on a year-over-year basis, its adjusted earnings--which strip out one-time charges--handily beat analysts' forecasts.

"We are pleased with our core operating results this quarter," said Gerald McCaughey, CIBC's president and chief executive, on a conference call.

CIBC's net profit fell to 306 million Canadian dollars ($281 million), or 73 Canadian cents a share, from C$862 million, or C$2.09, a year earlier. Results were hurt by C$543 million in charges related to the bank's struggling Caribbean operations, which CIBC had warned about earlier this month.

Adjusted earnings improved to C$2.17 a share, ahead of the Thomson Reuters mean estimate for a profit of C$2.07.

CIBC said its core retail and business banking earnings fell 5% to C$546 million, while wealth-management earnings jumped 29% to C$117 million. Wholesale banking earnings were up 11% to C$213 million.

The bank said its mainstay banking operations were affected by lower credit-card revenue because of changes related to the Aeroplan credit-card portfolio.

Last year, Aimia Inc., which owns the Aeroplan loyalty-reward program, ended its longtime relationship with CIBC in favor of Toronto-Dominion Bank. TD purchased about half of the existing Aeroplan portfolio from CIBC and became the loyalty-reward program's primary card issuer.

Darko Mihelic, analyst with RBC Dominion Securities Inc., estimated that "lost earnings on the sale of the Aerogold credit card portfolio" amounted to about C$50 million. CIBC's Aeroplan credit cards are known as Aerogold cards.

"Excluding the lost revenues and earnings of [the] Aerogold card portfolio, underlying revenue growth looks like 3% in Canadian P&C [personal and commercial]," he wrote in a research note.

Jason Bilodeau, an analyst with Macquarie Capital Markets Canada, said "the hit from the Aeroplan loss" may have been larger than expected.

CIBC also raised its dividend, marking the second-consecutive quarterly increase. It will now pay C$1.00 a share, an increase of 2 Canadian cents. That will result in a payout ratio of 46%, which is near the top of the bank's target range of 40% to 50%.

"There is a growing comfort level with living in the higher end of the payout ratio," Mr. McCaughey said.

Meanwhile, CIBC's common equity Tier 1 ratio increased to 10% from 9.5% at the end of its fiscal first quarter.

"For a bank that has drastically reduced its risk profile, this is an exceptionally high level and, without any significant change in its stance to returning capital to shareholders, will likely continue to fuel speculation regarding acquisitions," said John Aiken, analyst at Barclays Capital Inc.

Mr. McCaughey reiterated that CIBC would consider potential acquisitions worth more than C$1 billion to expand its wealth-management business. Even with its plump capital cushion, the bank would likely issue shares if it pulled the trigger on a deal of that size, he said.

He said that "strategic fit" would be the primary consideration for any acquisition. "If we found something with the right strategic fit for CIBC, our price appetite would go up," he added.

Earlier this month, CIBC was considered a potential suitor for Russell Investments. The Wall Street Journal has since reported that London Stock Exchange Group PLC has emerged as the most likely contender to acquire Russell, which has stock-index and asset-management businesses.

CIBC closes out the reporting season for Canada's big banks, a quarter that has seen better-than-expected results across the board largely on the strength of core domestic-banking operations and improved wealth-management and capital-markets results.

Write to Rita Trichur at rita.trichur@wsj.com and Judy McKinnon at judy.mckinnon@wsj.com

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